Following the latest set of restrictions in November in the UK, the housing market will remain open. However, the outlook for house prices is looking increasingly uncertain. In this post, we look at how the Coronavirus epidemic is impacting the market from the perspective of homebuyers and sellers, as well as those in the real estate business.
Why has the property market been doing so well since the first lockdown?
The swift actions taken by the government earlier this year, in the forms of mortgage payment holidays and the furlough scheme, meant; that despite the recession, the property market has been able to keep moving forwards. This is why when we would usually expect to see a dip in house prices during a recession (being driven by people who are forced to sell as they can no longer afford it due to job loss, for instance); we have instead experienced a market that is being driven by people who are motivated to move, and who can afford to do so. In previous recessions, where no government support was offered, this resulted in people being forced into a financially challenging situation where they needed to move home.
When the housing market was forced to close down earlier this year, property website Zoopla reported that an estimated 375k property sales worth approximately £82 billion were placed on hold. When the market re-opened after the first lockdown, the property market was flooded on a large scale.
Buyers were typically looking for country locations and more space, and due to new home working arrangements, they were able to look for properties more rurally and not necessarily be tied into needing a property near a place of work. At this point, it seemed quite clear that it was a sellers’ market. Add to this, the news of the stamp duty holiday which saw the nil-band raised from £125k to £500k, and it’s easy to see why, by August, house sales hit a record milestone; with Rightmove reporting that a 10-year high had been achieved with the number of properties selling within 7-days of being listed.
UK House Price Outlook
Although it’s now expected there will not be any immediate drops in UK house prices, the economic impact of the secondary lockdown could have implications that surface further down the line. In October, it was widely reported that annual house price growth had reached a five-year high of 5.8%. However, there seems to be a growing consensus that this growth will not continue and that we should expect to see only minor price falls in the market next year.
The forecasts for UK house prices have varied a lot throughout the Coronavirus epidemic.
Deutsche Bank predicted drops as high as 23pts, while Zoopla and Savills remained more optimistic after the surge and predicts the year will end more positive, up 4% overall.
Ultimately, both the buying power and mortgage availability are all determined by the state of the economy. For those looking at borrowing money for a mortgage, forecasts suggest that the Bank of England will not look to raise the base rate any time soon.
After the furlough support scheme comes to an end, followed swiftly by the end of the stamp duty holiday in March, all eyes will be on the state of the economy and its recovery. As this period is also thought to be the time when unemployment levels in the UK will peak, the potential for price falls will depend on how serious the damage to the economy is, and indeed, how much time it takes for unemployment levels to fall. If unemployment levels become too high, this could have a direct impact on property prices, and more people could be forced to sell their properties. Any further restrictions on lending could also reduce the prospects for first-time buyers as well.
The Impact of a Second Lockdown on UK Property Businesses
As we’ve already mentioned, the UK property markets are open for business. While Wales did face a two-week circuit breaker close down during the final part of October and early November, they are now fully operational once more.
Overall, the property market is showing great levels of resilience during lockdown number two. Property valuations are up by 38% over the same period, and as expected, viewings have fallen by around 15%. Interestingly, property exchanges have risen by approximately 11%, reaching another all-time high.
Although some estate agency owners feel sellers and buyers are potentially delaying decisions until after lockdown two is complete, there are others who report they’ve seen an increase in their property business revenues compared to the same period last year.
Outside of the control of UK property is the looming potential for a no-deal Brexit and the race to find a vaccine or treatment for COVID-19. Both of these events will impact the property market in one way or another. However, for now, those in the business of trying to forecast what will happen in the market seem to confer that following a busy summer period and the release of pent-up demand following the easing of the first set of lockdown restrictions in the UK, there is enough momentum to keep the market moving forwards.
If you have any questions about your contractual obligations or would like help with any property issue, our commercial property solicitors at North London firm OGR Stock Denton can give you the guidance needed to know exactly where you stand.